Editorial - For-profit colleges need stricter accountability

Sunday

Oct 31, 2010 at 12:31 AM

You've seen their names on TV and on the web: DeVry, the University of Phoenix, ITT Technical Institute. They aren't like most public or private institutions: They operate for profit. And now, the Obama administration says it's time to put some rules on these colleges.

You've seen their names on TV and on the web: DeVry, the University of Phoenix, ITT Technical Institute. Some have been around for a long time, some are relatively new. But they aren't like most public or private institutions: They operate for profit.And now, the Obama administration says it's time to put some rules on these colleges, particularly when it comes to their use of federal grants and student loans. The administration came out with a list of rules on Thursday, most of them aimed at reining in misleading recruiting practices and requiring the institutions to make sure that students are qualified for the federal money and aren't being encouraged to take out far more in loans than they realistically can expect to repay.Among the information they will be required to report are costs, debt levels, graduation rates and placement rates. The new rules also close loopholes in regulations prohibiting admissions recruiters from being paid according to how many new students they sign up.The new rules are not an attempt to eliminate for-profit institutions, many of which fill an unmet need in the higher education system. Many provide flexible online programs for people with full-time jobs who can't attend a traditional college.But these schools tend to be much more expensive than similar programs at community colleges and public universities, and that means that their students receive a lot of federal money through grants and loans. Some also have been investigated for misleading recruiting practices or for encouraging students to take out big loans for programs they aren't likely to complete or that will saddle them with more debt than they can repay.According to the federal government, 11 percent of students enrolled in postsecondary education are in programs at for-profit institutions. But those institutions account for 26 percent of all student loans and 43 percent of student loan defaults. The median debt load is $14,000 for students in two-year programs.In 2009, students at these schools received $4 billion in Pell Grants and $20 billion in federally backed loans. And more than a quarter of these “proprietary institutions” – the industry prefers a label less mercenary than “for-profit – count on federally funded financial aid for 80 percent of their revenues.Something's wrong, and it would be fiscally irresponsible not to take action to correct the problem.A coalition representing the industry has characterized efforts to impose stricter regulations as an attempt to put them out of business. What they are is an attempt to require greater accountability from businesses that benefit from the federal grant and loan programs. It's the taxpayers' money.The rules released Thursday were developed after administration officials listened to and read comments from members of the for-profit education industry, consumers and other interested parties. Public hearings are scheduled for this week, and unless there are any additional changes they'll take effect in July 2012.Those institutions that already are behaving responsibly and ethically should not fear reasonable rules. Those that aren't shouldn't be getting the taxpayers' money anyway.